System, method and program for preventing gaming in a trading system

ABSTRACT

System, method, and program for preventing gaming in a trading system. The systems, methods and programs can receive an order from a trader to trade securities in an alternative trading system, determine if gaming is occurring, set a price collar for the order, and submit the order to the alternative trading system with the price collar.

REFERENCE TO RELATED APPLICATION

This application is a Continuation of and claims priority to U.S. patentapplication Ser. No. 12/000,892, filed Dec. 18, 2007, which claimedpriority to provisional application No. 60/875,420, filed Dec. 18, 2006,the contents of each of which are incorporated herein in their entirety.

BACKGROUND OF THE INVENTION

1. Field of the Invention

This invention relates generally to systems and methods for improvingthe quality of liquidity of commodities, such as stocks. Particularly,this invention relates to systems and methods preventing gaming oftrading forums in computerized trading and alternative trading systems.

2. Background of the Related Art

The liquidity of a stock refers to the owner's ability to buy or sellthat stock without any, or at least with minimal change in value. If astock is not highly liquid, then the owner may be concerned that sellinga large number of shares may depress the price that the stock is soldat.

Maximizing liquidity in the marketplace generally requires a largenumber of matching offers at matching prices. Thus, if a trader wouldlike to sell 400 shares of XYZ stock at the current price, then thattrader would seek out as many contra parties who desire to buy shares ofXYZ stock for at least the current price. The difficulty arises in thatother traders can vary their trading strategies, and particularly, theirpricing strategies, based upon knowledge about trades for particularstock. In this case, when the trader sells all 400 shares in a singletransaction, then there is no opportunity for price movement and noliquidity problems can arise. However, if the trader sells only aportion of a total order, say 100 shares, then there is a risk thatpotential purchasers for the remaining shares will have knowledge aboutthe transaction involving the first 100 shares have just been sold. Suchknowledge can be used to “game” a trade. Such gaming is prevalent withelectronic trading.

In electronic trading, there are generally two types of executingdestinations for electronic orders: displayed and non-displayed. Orderstransmitted to a displayed destination are published, i.e., the bids andoffers are published to parties that subscribe to the destination. TheNYSE, NASDAQ and ECNs (e.g., LAVA, BITS, etc.) are examples of displayeddestinations.

In non-displayed destinations, orders are not published, i.e., bids andoffers are not displayed to outside parties and therefore, the ordersare hidden. Non-displayed destinations, or hidden liquidity pools, arecommonly called “dark” destinations or pool. Non-displayed destinationsare typically known as Alternative Trading Systems (ATS's) and includePipeline, ITG POSIT, LIQUIDNET, BIDS and others.

ATS's are attractive destinations for block trading because informationleakage is minimized or eliminated when orders are submitted to thesenon-displayed destinations. Even though non-displayed destinationstypically have less available liquidity than displayed destinations, ATSliquidity is extremely valuable to institutional traders due to theminimized information leakage. For example, if a trader wants to buy 1million shares of a stock and initially sends an order to buy 100,000shares to a displayed destination, then this order information will beavailable to all parties subscribing to the market data. Consequently,sellers will now be willing to sell only at much higher prices, thus thestock price will move up. On the other hand if the same order issubmitted to an ATS, the information is not available to other tradersand the stock price may not move.

Even though ATS's are non-displayed, they can still be vulnerable togaming because ATS's generally have fewer parties trading than displayeddestinations. Thus, there is a need for new and improved systems andmethods for preventing gaming in non-displayed trading destinations.Such systems and methods will improve the desirability of non-displayedtrading destinations and accordingly, can result in high liquidity andeven further decreased risk of gaming in that destination.

SUMMARY OF THE INVENTION

According to the present invention, systems, methods, and computerprograms are provided for preventing gaming in a trading system. Thesystems, methods and programs can receive an order from a trader totrade securities in an alternative trading system, determine if gamingis occurring, set a price collar for the order, and submit the order tothe alternative trading system with the price collar.

According to an embodiment of the present invention, a computerimplemented method is provided for preventing gaming of at least onealternative trading system. The method may includes steps of receiving aplurality of orders to trade securities in an alternative trading systemfrom a plurality of traders, determining whether a predatory orderexists in the plurality of orders, setting a price collar for each orderin the plurality based on results, and submitting each order to thealternative trading system with the price collar.

According to an embodiment of the present invention, a computer-readablemedium storing computer-executable instructions for preventing gaming ofat least one alternative trading system is provided. The operations ofthe program may include receiving a plurality of orders to tradesecurities in an alternative trading system from a plurality of traders,determining whether a predatory order exists in the plurality of order,setting a price collar for each order in the plurality based on resultsof the determining step, and submitting each order to the alternativetrading system with the price collar.

According to an embodiment of the present invention, a system forpreventing gaming in a trading system includes a trading facilityconfigured to receive a plurality of orders to trade a tradable assetfrom at least one trader via an electronic network, to access tradinginformation relating to trading activity in at least one alternativetrading system for the tradable asset, to determine whether gaming isoccurring for the tradable asset, and setting a price collar for each ofthe plurality of orders, a value of the price collar being based onwhether gaming is occurring, and to transmit the plurality of orderswith the price collars to the alternative trading system.

The above and/or other aspects, features and/or advantages of variousembodiments will be further appreciated in view of the followingdescription in conjunction with the accompanying figures. Variousembodiments can include and/or exclude different aspects, featuresand/or advantages where applicable. In addition, various embodiments cancombine one or more aspect or feature of other embodiments whereapplicable. The descriptions of aspects, features and/or advantages ofparticular embodiments should not be construed as limiting otherembodiments or the claims.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a flowchart of an exemplary work flow for allocating ordersacross ATS's and ECNs according to embodiments of the present invention.

FIGS. 2-3 are illustrations of a trading period in which gaming occurs.

FIG. 4 is a flow chart of an exemplary method for preventing gamingaccording to the present invention.

FIG. 5 is a block diagram of an exemplary trading system that includefacilities for preventing gaming according to the present invention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

Information leakage in an ATS can be a particularly acute problem.Unlike displayed destinations, the trader that is the victim of theleaked information may be unaware that a “predator” has the leakedinformation. There are many ways that information can be leaked out ofan ATS, allowing a user to learn that a symbol is active in that ATS.

A trader may learn that there is a SELL order for a symbol by sending asmall BUY order to an ATS and determining if the BUY order is executed.If the BUY order is not executed, then a trader may send a SELL orderfor the same symbol, having cancelled the BUY order, in order todetermine if there is a BUY order for that symbol. If neither the BUYorder nor the SELL order are executed, this is evidence that the symbolis not currently active in the ATS.

Additionally, proprietary traders may have access to information aboutthe orders in an ATS that are being offered by the same firm. If an ATSsignals users concerning orders currently in the ATS, then it is eveneasier to determine if a symbol is active in the ATS. There are othermethods used by traders that would be known to one of ordinary skill inthe art, to determine if a symbol is being actively traded in an ATS.

Leaked information may be exploited by opportunistic traders, or“predators,” to the detriment of other traders. For example, if an ATSpredator determines that there is a large SELL order for symbol XYZ inan ATS, then that predator can start submitting SELL orders for the samesymbol in the open market, using aggressive orders to move the price ofthe spread downward. Once the price of the spread is moved downwardsatisfactorily, the predator can then execute a large BUY order at thelower price in that ATS, thereby achieving a price improvement andlocking the profit from the transaction at the detriment of otherunknowing traders. These kinds of practices are considered to be gamingpractices.

Different Approaches to Liquidity in ATS's

ATS's often have different policies or trading logic resulting indifferent levels of liquidity available at each ATS. Selected examplesof these differences are found below:

1. ATS's are exposed to different types of customers. ATS's aretypically exposed to institutional buy-side firms only, brokers,computerized trading algorithms, and/or statistical arbitrage firms.Some ATS's accept retail liquidity in addition to institutionalliquidity. The nature of the participants in an ATS determines thequality of liquidity for that ATS. For example, if an ATS is exposed tostatistical arbitrage firms, then the liquidity of that ATS isconsidered lower quality.

2. ATS's often require a minimum order quantity in order to submit anorder to the ATS. Generally, larger the minimum order quantitylimitation results in better quality executions in the ATS, and as aresult, less information leakage will occur. With less informationleakage there is a reduced risk of predatory gaming and an increase inthe quality of the liquidity on the ATS.

3. Some ATS's allow “Immediate or Cancel” (IOC) type orders, whichcancel if the order is not executed immediately upon receipt into theATS. If an ATS does not have a minimum order quantity limitation,traders can use small IOC orders to “ping” the ATS, whose executionidentifies the existence of the other side to a trade. By thistechnique, information is obtained about the liquidity in anon-displayed trading forum. Thus, a lack of a minimum order quantitylimitation can expose an ATS to trading techniques that could be used bypredators, and the quality of liquidity in the ATS can be reduced.

4. Some ATS's send signals to their traders if the ATS receives an orderif the customer also has submitted an order for an asset of the samesymbol. Other ATS's send indications when it receives orders that havethe same symbol and but are the opposite side as the customers. Stillother ATS's allow customers to request information about a particularsymbol (even though the customer does not have an order for thatsymbol). Because these ATS's are liberally distributing tradeinformation, an ATS increases the risk that its traders can be exposedto predatory practices and reduces the quality of liquidity at the ATS.

5. Some ATS's conduct periodic quality control checks to prevent misuseof the ATS where traders discuss the side and size of the order andexport this information in the displayed market or ATS. While not allATS's conduct these checks, those that do help to improve the quality ofliquidity in each individual ATS.

6. Some ATS's allow their proprietary traders to send their ordersthrough their ATS and some do not. This may also affect the quality ofthat ATS liquidity.

In brief, even though the liquidity provided by ATS's is extremelyvaluable to the institutional trader due to less information leakage ascompared to displayed destinations, there are different propertiesassociated with each ATS that makes its liquidity more or lessdesirable.

FIG. 1 illustrates an exemplary work flow for a trade router system,such as ITG's DARK SERVER, that routes orders to “dark” pools. As shown,orders can be routed from a single source to numerous locations, such asdark ATS's, dark ECN's, or Dark Float. According to one example, asingle order submitted by a trader can be divided into multiple, smallerorders, which are simultaneously sent to multiple non-displayeddestinations, thus exposing hidden liquidity. Shares can be dynamicallyreallocated as an order in any given destination is completely executed.Such processes may be referred to as “liquidity aggregators.”

In this example, an order is allocated across multiple ATS's and ECNs.Some orders may be sent to Dark ATS, an example of a non-displayedtrading destination. POSIT Now, an ATS managed by ITG INC., offerscontinuous intra-day crossing and total anonymity. Millennium, alsomanaged by ITG INC., is another example of a non-displayed liquiditypool. PIPELINE is an ATS that focuses on block trades. Other orders maybe sent to Dark ECN. Dark ECN in an example of a non-displayeddestination that allows IOC orders, which can be used to search forhidden liquidity in ECN's. Orders may also be sent to a destinationcalled Dark Float, which uses a passive algorithm to earn spread in theopen market.

Orders, or fractions of orders, that have not been executed are swept toPOSIT Match. POSIT Match performs scheduled matches throughout the dayand after hours. If an order has not been filled in POSIT Match, it willagain be allocated to the various ATS's and ECNs.

A computer implemented liquidity aggregator process can be provided toallow traders to participate in multiple ATS's simultaneously withouthaving to work out the mechanics of each individual ATS. Unfortunately,as described above, individual ATS's leaks trade information in varyingcapacities. Thus, while an aggregator will increase productivity for thetrader, it introduces a problem in that the traders are unable to watchand control the orders at the individual ATS's in an effort to avoid thepotential gaming of their orders at each ATS.

One aspect of the current invention relates to systems and methods ofgaming prevention to be used in conjunction with a liquidity aggregator.According to one embodiment of the invention, a gaming prevention layeris provided to ensure that orders submitted to each ATS by a liquidityaggregator are protected from gaming by others, through the use, interalia, of different inventive heuristics. Heuristics may tailored foreach various ATS's, and may be more or less conservative depending onthe characteristics of each ATS. As a result, liquidity aggregatorcustomers can submit large orders without being exposed to gaming ofpredators at each ATS.

FIGS. 2-3 are graphs that illustrate trading periods during which gamingoccurs. As an outside observer, it is impossible to be absolutely surethat gaming is or is not occurring, but patterns may indicate whengaming is taking place. The example, as depicted in FIGS. 2-3,illustrates patterns of activity resulting from gaming. As shown in FIG.2, the market appears to have been driven downward around mid-day, andmany trades “crossed” at prices significantly lower than the startprice. According to an embodiment of the present invention, a gamingprevention policy is provided for each destination ATS. Such a policymay be configurable to different levels, such as: Strict, Medium, Loose,and None. Further, a gaming prevention policy may also be configurableat the user/trader level.

According to one embodiment of the present invention, gaming preventionlogic can utilize a price collar for each order and update the pricecollar periodically or randomly throughout the trading day. For example,price collars could be updated at common intervals, e.g., every 30seconds. The price collar used can be set based on whether or not gamingis detected. Examples of price collars, according to the presentinvention, are described in more detail below.

Gaming Detection

Aspects of gaming detection according to embodiments of the presentinvention are described with reference to FIGS. 2-3, which depicttrading activity during a set trading period. Gaming detection logic,for example, as described below, may be continuously applied for theduration of a trading period. When gaming checks are satisfied, it willbe determined that gaming has occurred. Preferably, systems and methodsfor preventing gaming can determine in real-time when gaming actuallyoccurs. Further, it is preferably that actual orders from predators canbe identified. The following Checks can be provided, but are not anexhaustive list of policies and are not meant to limit the invention.

Check 1—have there been “fills” (i.e., executions) corresponding to anorder, i.e., symbol and sides in that destination, during the past Tseconds? Since most destinations keep the liquidity hidden, as describedabove, predators may ping ATS's with small orders in an effort touncover liquidity. Check 1 determines if a predatory trader has likelybeen able to uncover information about our order at that ATS. This checkmay be represented as: Number of Fills in T seconds>0.

As depicted in FIG. 2, trades may occur at various time pointsthroughout the day. For example, assuming that the end of the secondgroup of trades, approximately 11:30-12:00, has occurred in the last Tseconds, Check 1 would identify these fills, and the first check issatisfied.

Check 2—is the fill amount a significant portion of the market volume?Stock prices are more easily manipulated if a stock is not very liquid.Thus, even if a predatory trader finds out trade information in an ATSby, e.g., pinging the ATS, the price of the stock is hard to manipulatethe stock if the stock is highly traded. Therefore, if the fill amountis not for an amount that is a significant portion of market volume,then a price movement in the stock in the last T seconds is more likelydue to natural price movement in the stock rather than to predatoryactions of a gamer. This check may also be represented as:

(Fill/Market volume) in T seconds>Coefficient 1.

Also, the time horizon can be varied. For example, if a first tradertrades 400,000 shares of XYZ stock in the last T=10 minutes, and asecond trader trades 4000 shares of the same XYX stock, the price at(T=−10) minutes may not be pertinent. Thus, in this case, a shorter timehorizon should be used to gain pertinent information on gaming. On theother hand, if a trader trades 2000 shares of ABC stock in the last 20minutes, out of which 1400 shares of ABC stock in a single ATS, it isnecessary to look at the price 20 minutes in the past because this stockis less liquid than XYZ stock.

Referring to FIG. 3, the size of each circle represents the size of thetrade. As shown, the second group of trades between 11:30-12:00constitute a significant portion of the market volume because the totalarea of the circles corresponds to the total market volume.

Check 3—is there price movement during the last T seconds of a trade'sopposite side that has moved upwards for BUY orders and downward forSELL orders? This check may also be represented as:

Price_(t)=Price_((t-T secs))>0 for BUY orders and <0 for SELL orders.

In this example, it is assumed that a SELL order is being placed, andthe price is going down. This is illustrated by the falling price of theexecutions over time.

Check 4—is price movement significant? Significant price movement can bemeasured by comparing the price movement for a stock with the volatilityof the stock. Thus, if a volatile stock moves 20 basis points (bps) itmay be acceptable, but a 20 bps price movement may satisfy this checkfor a less volatility stock. This check may be represented as:

Price_(t)=Price_((t-T secs))>Coefficient 2*Volatility of the stock*priceof the stock

for BUY orders, and

Price_((t-T secs))−Price_(t)>Coefficient 2*Volatility of the stock*priceof the stock

for SELL orders.

Whether the trading period being analyzed satisfies this final checkdepends on the volatility of the stock and the value of coefficient 2.In this example, it is assumed that the stock is not otherwise volatile(as demonstrated by the volume of trading between 10:00 and 11:00 inFIG. 3) and that Coefficient 2 is low enough that gaming is detected.

Another form of gaming occurs when a predatory trader is buying a stockand loads an indication into the ATS screen to see if there is interestamong the other ATS users. If the indication is answered, there is abuyer, seller or possibly both; however the predatory trader does notknow which. The predator trader may nonetheless penny the offer in theopen market with small size to move the midquote down in the predator'sfavor. In thinly traded stocks with wider spreads, the predatory tradermay be able to move the midquote down several cents in a short period.The predatory trader then issues their original buy order to the ATS andcancels their open market limit orders. Thus, there is a 40% chance thatthe predatory trader gets a fill at a better price, and conversely,there is a 40% chance that nothing is done. However the predatory traderhas learned that they are competing with another buyer, and can actaccordingly in the open market. The risk and cost are low (only smallorders used in the open market at favorable prices) to engage in thisstyle of gaming.

One approach to anti-gaming is to set price collars to essentiallyprevent trading in a situation in which gaming is occurring.

Dynamic Price Collars

According to embodiments of the present invention, each order receivedmay be given a price collar. If no gaming has been detected (e.g., byrunning one or more of the checks about), a price collar is applied toan order and set to the current price +X bps for BUY orders and to thecurrent price −X bps for SELL orders. This price collar can provideenough price range for the order to be traded relative to current price,while at the same time, can prevented the order from being gamed in thenext time period. X is preferably set to a small number (e.g., 2-5 basispoints) that ensures that the order does not deactivate itself inabsence of gaming until anti-gaming procedures are applied again. Ifanti-gaming procedures of the present invention are applied in a shorttime period, such as every 30 seconds, X may be a small number. However,if anti-gaming procedures are applied less frequently, then X should beset appropriately higher.

When gaming is detected, a price collar may be set as thePrice_((t-T secs)) (i.e., when gaming has been determined to haveoccurred)+coefficient*volatility of stock*price of the stock for BUYorders and set as the Price_((t-T secs))−coefficient*volatility ofstock*price of the stock for SELL orders. This price collar can provideenough price range for the stock to move between t-T and t, but canprevent the order from being executed at extremely poor prices, whichmay occur due to predatory trading activities. Note: this price collarwill yield a price lower than the current price for BUY orders and aprice higher than the current price for SELL orders in the presence ofgaming. This can be considered to be equivalent to deactivating theorder in the ATS without canceling the order. Because the order ispriced passively in the ATS, it reflects the lowest fair price inabsence of gaming, at which a trader is willing to trade if thepredatory trader stops gaming and the price is no longer contrived.

Similar to the gaming checks provided herein, the price collar may beconfigured to be more or less conservative/aggressive depending onfactors, such as, for example, the quality of liquidity at that ATS. Forexample, the coefficients described above may be set to be higher invalue for a high quality liquidity ATS.

FIG. 4 is a flow chart of an exemplary method for preventing game in atrading system according to an embodiment of the present invention.Method 400 begins at step 402 in which a first order is received. Otherorders may be received, some of which may be for any variety of tradingdestinations. The method may then continue to step 404, in which agaming level is chosen. Gaming levels may have numeric values or mayhave levels. In some embodiments, step 404 may be omitted, and in otherembodiments, step 404 may be performed automatically.

Next, as step 406, it is determined whether gaming is occurring based onthe plurality of orders. Gaming may be determined consistent with thechecks disclosed above. In this embodiment, four steps 406 a-d areperformed.

At step 406 a, it is determined whether there have been any fills foreach order during a past selectable number of seconds, e.g. t-T seconds.Such a determination may be made based on analysis of execution dataacquired from an ATS.

At step 406 b, it is determined if any of the fills constitute asignificant portion of market volume of an asset of the order. In someembodiments, the portion that constitutes a significant portion may bechanged dynamically. In other embodiments, the portion that constitutesa significant portion may be static. Such a determination may be madebased on analysis of execution data acquired from an ATS.

At step 406 c, it is determined if price movement for the opposite sideof the asset has been positive or negative during a past user selectablenumber of seconds. In some embodiments, this user selectable number ofseconds may be the same value as in step 406 a. In others, these twovalues may be different.

At step 406 d, it is determined if the price movement of the asset issignificant. In some embodiments, the amount of movement that issignificant may be changed dynamically. In other embodiments, the amountof movement that is significant may be static. In this embodiment, ifsteps 406 a-d are determined in the affirmative, then step 406 isdetermined to affirmative and gaming is determined to exist.

At step 408, a price collar is set for each order in the plurality basedon results of steps 406 and 404. Step 408 a asks if gaming occurs. Ifthe answer to this inquiry is yes (output from step 406), the method mayperform step 408 b and/or 408 c. At step 408 b, the price collar of eachBUY order is set as a price of an asset at a time that is a userselectable number of seconds in the past added to a quantity of acoefficient multiplied by a volatility of said asset multiplied by acurrent price of the asset.

At step 408 c, the price collar of each SELL order is set as a price ofsaid asset at a time that is a user selectable number of seconds in thepast minus a quantity of a coefficient multiplied by a volatility ofsaid asset multiplied by a current price of said asset.

If step 406 a is not true, i.e. NO, the method may perform steps 408 dand/or 408 e. At step 408 d, price collar of each BUY order is set as acurrent price of an asset added to a user selectable number of basispoints. At step 408 e, the price collar of each SELL order is set as acurrent price of an asset added to a user selectable number of basispoints.

At step 410, each order is submitted to the alternative trading systemwith the price collar.

FIG. 5 is a block diagram of a trading system that includes facilitiesfor preventing gaming according to an embodiment of the presentinvention. In the depicted network system 500, a trader may connect to atrading destination 504 via a trading client 502 a via an electronicdata network 506. The trading client could include a number of availableorder management or execution management systems that provide electronictrading facilities and/or access to trading services. The electronicconnection could include a proprietary connection, FIX connection, orother known connections for transmission of electronic trade orders, andmay utilize a proprietary network, the internet and world wide web,wireless electronic networking, etc.

Trading destinations 504 may include a first ATS 504 a, a second ATS 504b, a first ECN 504 c and a second ECN 504 d. The first ATS 504 a mayoffer different liquidity than the second ATS 504 b due to differingpolicies and/or variable characteristics of the individual ATS's.Trading client 502 a may also be connected to an ECN 504 c, 504 d, ormay connect to a combination of trading destinations 504.

The client 502 a may transmit trade orders to a liquidity aggregator508. As described above, the liquidity aggregator may be configured tofind hidden liquidity in various trading destinations 504. The trader502 a may send a large buy order (not shown) to the liquidity aggregator508 across the network 506. The liquidity aggregator 508 may beconfigured to allocate the large order into multiple, smaller orders(not shown). The liquidity aggregator 508 may be configured to routeeach of these smaller orders to different trading destinations 504across a network 506. The liquidity aggregator 508 may be configured togenerate a number of combinations of orders and trading destinations504, as described above. The trading destinations 504 will send resultsof the smaller orders to the liquidity aggregator 508 across the network506. The liquidity aggregator 608 will report relevant results to thetrader 502 a across the network 506.

In addition to the trader 502 a, the network system 500 may also includea variety of other trade clients, including a predatory trader 502 b.The term “predatory” relates to the strategy of trader 502 b and doesnot necessarily signify a different apparatus than the any other tradeclient.

A predatory trader 502 b may try to game trading destinations 504 inorder to profit at the expense of other traders. The predatory trader502 b may send orders to a liquidity aggregator 508 just as the trader502 a might.

According to embodiments of the present invention, the liquidityaggregator 508 can include facilities for preventing gaming, referencedin FIG. 5 as gaming prevention layer 510. Alternatively the gamingprevention layer could be included within an ATS or be executed as aseparate computer server or the like. As described elsewhere, the gamingprevention layer 510 may set price collars, or other techniques, toensure that the trades being executed by a trader 502 a are not subjectto gaming. The trader 502 a may place a variety of orders to theliquidity aggregator 508, which may in turn place multiple orders toboth the second ATS 504 b and the first ECN 504 c. The predatory trader502 b may then place predatory orders to the second ATS 504 b. Thegaming prevention layer 510 is configured to detect these practices,such as by application of the one or more of the processes describedabove, and to prevent the orders from being filled at the second ATS 504b while the predatory trading is occurring. The gaming prevention layer510 may continue to leave orders to the first ECN 504 c unchanged as nogaming is occurring.

The present invention can be implemented with many known computer andnetwork architectures, with an appropriate combination of hardware,software and/or firmware. One skilled in the art would understand thatthe data required to perform the above-described processes can beacquired from known sources. Accordingly, other facilities may beaccessed or included in order to support the features of the presentinvention.

Thus, a number of preferred embodiments have been fully described abovewith reference to the drawing figures. Although the invention has beendescribed based upon these preferred embodiments, it would be apparentto those of skill in the art that certain modifications, variations, andalternative constructions could be made to the described embodimentswithin the spirit and scope of the invention.

1. A computer implemented method for preventing gaming of at least onealternative trading system, said method comprising: receiving aplurality of orders to trade securities in an alternative trading systemfrom a plurality of traders; determining whether a predatory orderexists in said plurality of orders; setting a price collar for eachorder in said plurality based on results of said determining step; andsubmitting each order to said alternative trading system with the pricecollar.
 2. The method as claimed in claim 1, further including a step ofsetting a gaming level based on at least one of the following: liquidityquality factors at said alternative trading system, types of users,minimum order limitations, allowance of “immediate or cancel” orders,criteria for signaling out information to traders, proprietary qualitycontrol checks already in place, and allowance of proprietary trades,and wherein in said step of setting a price collar, the price collar isselected further based upon said gaming level.
 3. The method as claimedin claim 1, wherein the step of detecting whether gaming occurs furthercomprises steps of: determining if there have been any executed orderscorresponding to any of the plurality of orders during selected timeperiod; if executed orders exist, determining if any of said executedorders constitute a significant portion of market volume of the asset ofthe order; determining if price movement for the opposite trade side ofeach order has been positive or negative during said selected timeperiod; and determining if said price movement of said asset issignificant.
 4. The method as claimed in claim 1, wherein the step ofsetting a price collar further comprises steps of: if gaming does notoccur, setting said price collar of each BUY order as a current price ofan asset added to a user selectable number of basis points, and settingsaid price collar of each SELL order as a current price of an assetadded to a user selectable number of basis points.
 5. The method asclaimed in claim 1, wherein the step of setting a price collar for eachorder further comprises: if gaming occurs, setting said price collar ofeach BUY order as a price of an asset at a time that is a userselectable number of seconds in the past added to a quantity of acoefficient multiplied by a volatility of said asset multiplied by acurrent price of said asset; or setting said price collar of each SELLorder as a price of said asset at a time that is a user selectablenumber of seconds in the past minus a quantity of a coefficientmultiplied by a volatility of said asset multiplied by a current priceof said asset.
 6. The method as claimed in claim 3, wherein the step ofdetermining if any of said fills constitute a significant portion ofmarket volume further comprises: determining if an amount of said filldivided by a market volume of said asset during a user selectable numberof seconds is greater than a coefficient 1, wherein said coefficient 1is based on each alternative trading system's liquidity.
 7. The methodas claimed in claim 3, wherein the step of determining if price movementfor the opposite side of said asset has been positive or negativefurther comprises: determining, for a BUY order asset, if a currentprice minus the price of said asset at a time that is a user selectablenumber of seconds in the past is greater than 0; or determining, for aSELL order asset, if a current price minus the price of said asset at atime that is a user selectable number of seconds in the past is lessthan
 0. 8. The method as claimed in claim 3, wherein the step ofdetermining if said price movement of said asset is significant furthercomprises: determining, for a BUY order asset, if a current price minusa price of said asset at a time that is a user selectable number ofseconds in the past is greater than a quantity of coefficient 2multiplied by a volatility of said asset multiplied by a current priceof said asset; or determining, for a SELL order asset, if a price at atime that is a user selectable number of seconds in the past minus acurrent price said asset is greater than a quantity of coefficient 2multiplied by a volatility of said asset multiplied by a current priceof said asset; wherein said coefficient 2 is based on each alternativetrading system's liquidity.
 9. The method as claimed in claim 1, furthercomprising selecting a gaming level from a range of gaming levels forsaid alternative trading system, wherein the step of setting a pricecollar is further based on a result of the selecting a gaming levelstep.
 10. A computer implemented system for preventing gaming of atleast one alternative trading system, said system comprising: means forreceiving a plurality of orders to trade securities in an alternativetrading system from a plurality of traders; means for determiningwhether a predatory order exists in said plurality of orders; means forsetting a price collar for each order in said plurality based on resultsof said determining step; and means for submitting each order to saidalternative trading system with the price collar.
 11. The system asclaimed in claim 10, further including means for setting a gaming levelbased on at least one of the following: liquidity quality factors atsaid alternative trading system, types of users, minimum orderlimitations, allowance of “immediate or cancel” orders, criteria forsignaling out information to traders, proprietary quality control checksalready in place, and allowance of proprietary trades, and wherein insaid means for setting a price collar, the price collar is selectedfurther based upon said gaming level.
 12. The system as claimed in claim10, wherein the means for detecting whether gaming occurs furthercomprises: means for determining if there have been any executed orderscorresponding to any of the plurality of orders during selected timeperiod; if executed orders exist, means for determining if any of saidexecuted orders constitute a significant portion of market volume of theasset of the order; means for determining if price movement for theopposite trade side of each order has been positive or negative duringsaid selected time period; and means for determining if said pricemovement of said asset is significant.
 13. The system as claimed inclaim 10, wherein the means for setting a price collar furthercomprises: if gaming does not occur, means for setting said price collarof each BUY order as a current price of an asset added to a userselectable number of basis points, and means for setting said pricecollar of each SELL order as a current price of an asset added to a userselectable number of basis points.
 14. The system as claimed in claim10, wherein the means for setting a price collar for each order furthercomprises: if gaming occurs, means for setting said price collar of eachBUY order as a price of an asset at a time that is a user selectablenumber of seconds in the past added to a quantity of a coefficientmultiplied by a volatility of said asset multiplied by a current priceof said asset; or means for setting said price collar of each SELL orderas a price of said asset at a time that is a user selectable number ofseconds in the past minus a quantity of a coefficient multiplied by avolatility of said asset multiplied by a current price of said asset.15. The system as claimed in claim 10, wherein the means for determiningif any of said fills constitute a significant portion of market volumefurther comprises: means for determining if an amount of said filldivided by a market volume of said asset during a user selectable numberof seconds is greater than a coefficient 1, wherein said coefficient 1is based on each alternative trading system's liquidity.
 16. The systemas claimed in claim 12, wherein the means for determining if pricemovement for the opposite side of said asset has been positive ornegative further comprises: means for determining, for a BUY orderasset, if a current price minus the price of said asset at a time thatis a user selectable number of seconds in the past is greater than 0; ormeans for determining, for a SELL order asset, if a current price minusthe price of said asset at a time that is a user selectable number ofseconds in the past is less than
 0. 17. The system as claimed in claim12, wherein the means for determining if said price movement of saidasset is significant further comprises: means for determining, for a BUYorder asset, if a current price minus a price of said asset at a timethat is a user selectable number of seconds in the past is greater thana quantity of coefficient 2 multiplied by a volatility of said assetmultiplied by a current price of said asset; or means for determining,for a SELL order asset, if a price at a time that is a user selectablenumber of seconds in the past minus a current price said asset isgreater than a quantity of coefficient 2 multiplied by a volatility ofsaid asset multiplied by a current price of said asset; wherein saidcoefficient 2 is based on each alternative trading system's liquidity.18. The system as claimed in claim 10, further comprising means forselecting a gaming level from a range of gaming levels for saidalternative trading system, wherein the means for setting a price collaris further based on a result of the selecting a gaming level step.
 19. Asystem for preventing gaming in a trading system, comprising: a tradingfacility configured to receive a plurality of orders to trade a tradableasset from at least one trader via an electronic network, to accesstrading information relating to trading activity in at least onealternative trading system for the tradable asset, to determine whethergaming is occurring for the tradable asset, and setting a price collarfor each of the plurality of orders, a value of said price collar beingbased on whether gaming is occurring, and to transmit the plurality oforders with the price collars to the alternative trading system.
 20. Thesystem as claimed in claim 19, wherein said trading facility is furtherconfigured to set a gaming level based on at least one of the following:liquidity quality factors at said alternative trading system, types ofusers, minimum order limitations, allowance of “immediate or cancel”orders, criteria for signaling out information to traders, proprietaryquality control checks already in place, and allowance of proprietarytrades, and wherein in the price collar is selected further based uponsaid gaming level.